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From being a retail giant and operating 2000+ stores across the United States, Kmart is now down to just three stores in the continental U.S. before its imminent collapse which is looming on the horizon.
As per a recent report from the Associated Press, the dying retail chain's Avenel, New Jersey store will be closing permanently on April 16. Following the closure of the Avenel location, the departmental store chain will continue to be on life-support with just three locations nationwide. The last three stores will be in Westwood (New Jersey), Long Island (New York), and Miami (Florida).
To make it sadder, the retail chain's parent firm Sears is also on the verge of closing down its operations with only 23 full-line stores in the U.S. as of last December.
What was the cause behind Kmart's agonizing failure?
The closure of the once-booming retail giant has been decades in the making. Launched over 122 years ago as Kresge's, the firm was rebranded to its now renowned name in 1977. It remained one of the biggest departmental store chains until the company started facing cut-throat competition in the 1990s from its rivals, Target, Walmart, and more recently, Amazon.
Unable to provide competitive pricing, the firm ended up bleeding itself to the ground. Kmart filed for bankruptcy in January 2002. The two leaders of the firm, chairman Charles Conaway and president Mark Schwartz, were also involved in many controversies around that time after being accused of embezzling company funds to finance their own investments and luxurious lifestyle. The two were also alleged to have lied to shareholders about the company's financial health.
At the time, Conaway reportedly accepted complete responsibility for the financial fiasco and stepped down as the chairman. Schwartz also had to leave soon after. The retail firm also released a statement and outlined its intent to reduce costs by "$350 million through reengineering the organization, staff reductions, office consolidations, and other actions" amidst the controversy.
The scandal and the poor sales of the stores caused a domino effect that reduced the credit score of the company and plummeted its stock price. Following the initial bankruptcy, many analysts cited the departmental chain's inefficient inventory management and the consequent lack of competitive pricing as one of the main reasons for its failure. It also became difficult for Kmart to attract new customers.
However, Kmart somehow managed to get back on track and recover from the bankruptcy.
How did Kmart and Sears come together?
In 2004, Kmart Holding Corporation merged with Sears Holdings Corporation, and bought Sears for a reported $11 billion. However, Sears did not attempt to go ahead with discount retailing and aggressive pricing like Walmart, which in hindsight might have been due to financial constraints.
The Edward Lampert saga:
As per multiple reports, Edward Lampert was the mastermind behind the merger. The billionaire businessman was the chairman of both businesses and became the CEO of Sears Holdings Corporation.
After the financial crisis (2007-2008), which reduced the organization's stock price by over 80 percent, Lampert split the company into around 40 divisions. These divisions conflicted with each other and often acted as separate entities with separate executives, which drove operational costs.
In 2018, fourteen years after its buyout, Sears declared bankruptcy. Their announcement was reportedly just days ahead of their $134 million debt at the time. However, following its bankruptcy in 2019, Lampert again took control of the firm under his newly formed private company Transformco.
As of now, a clearer picture of the company's debts and operations is not available due to the new parent company being private. However, with the rapid succession of the closure of Kmart and Sears stores, it is likely that this is the beginning of the unfortunate end.
